January 2011 | Vol.25 No.1
In our cover story this month we take a sobering look at the prospects for the year ahead, and what we find is eerily familiar. Sovereign debt worries, potential trade wars, continuing concerns that the US economy may yet stumble back into recession, instability at the core of the eurozone: None of these are new issues. In fact, the fears that corporations, governments and investors are confronting as we gaze into the coming year are all remarkably similar to those the world was contemplating as 2010 dawned.
Part of the reason why the beginning of 2011 looks so much like the start of 2010 is that many of the underlying problems facing the global economy are still the samealthough they have been identified over the past few years, the fundamental issues, such as trade, currency, economic and income imbalances, have yet to be resolved.
With seemingly so little having changed, it is tempting to characterize 2010 as a lost year, one when so much was possible but so little was achieved. But there is cause for optimism. The crisis in Greece and the turmoil in Ireland, for example, didn’t cause the eurozone to fall apart. If anything, in fact, the bloc’s response to the crises demonstrated its resilience rather than its vulnerability. The undercurrents of tension over currency manipulation that erupted briefly into the so-called currency wars didn’t throw the world’s economy into renewed turmoil. And although the dream of a unified system of global financial regulation seems as far away as ever from becoming a reality, genuine progress is being made. Rules relating to banking stability, derivatives clearing, cross-border trading and other key elements of a globalized world are all becoming clearer and more effective. As a result, the global economy is becoming more efficient and, potentially, more stable.
So, while the financial landscape might still look a lot like it did a year ago, as we march boldly into the New Year we are a lot better equipped to deal with the problems that 2011 will inevitably bring.
Until next month,